BENGALURU: The Indian unit of US retail giant Amazon has leased 6 lakh square feet of office space in Hyderabad, making it one of the largest office space deals this year. The deal was closed last week.

The under construction property in Madhapur suburb of Hyderabad is owned by Phoenix Group. “In the first phase, Amazon will occupy 250,000 sq ft with an option to expand it to 6 lakh sq ft over the next one and a half years," said a person having direct knowledge of the development.

“It will be occupied in two phases. Amazon will be paying a rent of around Rs 54 per sq ft. The facility will be ready by the end of December," this person said.

In response to ET’s email query, Amazon said: "As a company policy, we do not comment on what we may or may not do in the future”. Amazon India has outperformed rival Flipkart in terms of occupying large office spaces.

The ecommerce firm occupies 3.1million sq ft of office space in India, more than four times the 7 lakh sq ft that Flipkart has on rent.

"The American company has services here that cater to its global operations and that require space. The new facility will cater to overall ecommerce business of Amazon," said another person aware of the development.

Amazon has also been serving the rest of the world from India. A fresh 3 million sq ft facility is set to come up in Hyderabad in two years to house technology development and back-end operations of Amazon's global business. Amazon also has over 27 fulfilment centres in India.

Hyderabad is emerging as a hot destination for corporates looking to expand their presence but low supply remains a challenge for these firms.

Recently, Microsoft signed a 15-year lease deal for nearly 200,000 sq ft of premium office space at Knowledge City in Hyderabad, and plans to pick another 250,000 sq ft of space in its next phase of expansion.

"Business sentiments have certainly improved and this is clear in office leasing trends,” said Veera Babu, managing director, at Cushman and Wakefield, Hyderabad. “We have seen several companies looking at a long-term perspective and pre-leasing office space. For 2017, more than 70% of the upcoming space is already leased and there are active enquiries for space coming up in 2018 and 2019.”

According to JLL India, Hyderabad has the third-lowest vacancy level among all metros at 9%, and is behind Bengaluru and Pune, which have 4% and 5% vacancy levels, respectively.